835.00/8–1447
The Chargé in Argentina (Ray) to the Secretary of State
Sir: I have the honor to submit the following comment on the general political and economic situation in Argentina:
General
Perón’s success in the elimination of Chief of Police Velazco and some other strong nationalists from the Government has created a general impression of strength for Perón’s administration. This is strengthened by the fact that such action was accomplished quietly and was not followed by any disturbances. Although the Government appears to have consolidated its position politically, the financial and economic situation is causing it considerable worry and has created wide-spread dissatisfaction. All indications are that the financial and economic situation is becoming worse rather than better. Inflation is becoming more and more evident and is being accentuated by shortages of certain foodstuffs, especially potatoes, and also by the current gasoline shortage. The President and at least some of his high officials realize that the Five-Year Plan is not going in accordance with their high hopes, and that if it is to succeed at all, closer cooperation with the United States must be established. Both Perón and Bramuglia have taken great pains during the past two weeks or so to impress upon me their desire to reach a friendly agreement with the United States at Rio de Janeiro and to establish a basis of general cooperation with the United States. During the first conversation that I had with the President, he placed great emphasis on Argentina’s need for industrialization and his realization that such industralization could not take place without the assistance of the United States. He referred to such assistance specifically as the furnishing of technical help and knowledge and shipping machinery from the United States to the Argentine.
At the beginning of my first conversation with the Foreign Minister, he showed considerable reserve and among one of the first questions he asked me was whether his understanding was correct that Ambassador Messersmith’s withdrawal did not constitute an unfriendly act towards the Argentine. I remarked that the withdrawal of Mr. Messersmith was a matter of United States internal politics and Foreign Service administration and that it had no significance whatsoever so far as our policy towards Argentina was concerned. I told the Foreign Minister that I hoped our relations would be on an absolutely friendly basis and that we would all have to be realistic about things. I said we [Page 206] would not go on the basis that the Argentine Government was always wrong nor that it was always right but that we would believe what we saw and try to handle every problem on its own merits. During the first conversation I had with the President, he told me that the Foreign Minister had repeated my remarks to him regarding our policy of dealing with the Argentine. I told the President that I could see where we would probably have many differences of opinion, but I thought the only way to handle the situation was to discuss all problems on a friendly basis and work them out to best possible interests of both countries.
It could be argued at length whether Perón is a complete dictator; in any event, his Government has many characteristics of a dictatorship, it does not permit complete freedom of the press, and the tendency of Perón and his closest supporters is intensely nationalistic and towards government control of business. At this time, we must choose between a policy of being completely friendly to Perón, obtaining what advantages and concessions we can from him, and using our influence to prevent him from extreme actions prejudicial to our interests and solidarity in the hemisphere; or turning a cold shoulder to him with the result that we would succeed in making him aware of our moral disapproval of him and his Government and failing to accomplish anything useful. It is true that if we cooperate fully with the Perón government, we will contribute considerably to building up an administration which does not meet with our wholehearted approval. However, unless we make up our minds to be friendly to Perón, our business and commercial relations with the Argentine will become increasingly difficult and agreements at Rio and subsequently at Bogotá will be impossible.
Taken as a whole, the level of ability and integrity in the Perón administration is distressingly low. While in many respects, Perón could be described as a Fascist or at least dangerously near it, he and Bramuglia are the two men in the Government with relative outstanding ability and with whom it is possible to deal on a frank and completely friendly basis.
It is practically impossible to have a conversation with Perón or any of his higher officials without their bringing up the subject of Russia and the threat of Communism. Both Perón and Bramuglia have insisted at length to me that there was no possible question of Argentina taking a neutral position and much less a position favorable to Russia. They emphasized strongly their desire to cooperate with the United States. There is no doubt that they wish to use the threat of Communism to impress upon us the necessity of cooperation between the United States and Argentina, but they have been most careful to [Page 207] avoid any intimation of a threat that they might be neutral or side with Russia.
There is no doubt that the Argentine Government at the present time is deeply concerned with the overmounting inflation and the financial and economic crisis which has developed with comparative suddenness.
Financial and Economic Crisis
Since the beginning of the year, a feeling of uncertainty has been evident in the business atmosphere. It is generally felt that labor is getting somewhat out of control and in addition to the inflation caused by increases in wages, production has fallen at an alarming rate. Recently, the President called in several hundred labor leaders and appealed to them to increase production in order to save the economy of the country. The economy of the country is being handicapped by labor troubles and by restrictive forces including shortages of fuel, replacement materials, and transportation equipment. The Argentine Government recently became suddenly aware of its dwindling dollar balance and has placed restrictions on remittance abroad in foreign currency. Port congestion, decreasing production, the gasoline shortage, precipitate prices, restrictions on importations and on foreign exchange are factors which have contributed greatly to a general undermining of confidence in the Perón government and constitute the principal source of worry for the administration at the present time.
Most American and British businessmen as well as probably most of the Argentine businessmen and property owners are bitterly opposed to the Government and confidentially predict its downfall in the near future. Such predictions have been made regularly since Perón came to power and may be based more on hope than on actual belief. There is no doubt that the serious financial and economic situation is becoming a real threat to the Government although it does not as yet appear sufficiently acute to be an immediate threat to the present regime. There seems to exist at this time no real threat from any source to the existence of the Perón administration.
[Here follow sections on the Trade Promotion Institute (Instituto Argentine de Promoción del Intercambio), the Five-Year Plan (Plan Quinquenal) for economic development, the employment of technical experts in connection with the Plan, freedom of the press (see pages 317 ff.), Señora Perón, and discrimination against American vessels (see pages 251 ff.)]
Rio Conference
As reported to the Department in several telegrams, the President and Bramuglia have insisted in several conversations on Argentina’s [Page 208] sincere desire to have a successful conference at Rio.61 Argentina’s performance in past inter-American conferences makes it difficut to believe that they can go through the Rio-Bogotá conferences without bringing up questions and assuming attitudes calculated to enhance Argentina’s prestige and call the attention of the world to Argentina’s dominant position at the southern end of the Western Hemisphere. Even high Argentine officials refer to the powerful countries of the world today and glibly mention the United States, Russia, and the Argentine. There are some indications that the Argentines feel that the Rio conference will be purely political and will not definitely settle the fundamental questions in which they are most interested.
Armaments and the Bogotá Conference
Argentine officials discuss the Rio conference with optimism and confidence, but when the question of armaments is mentioned the atmosphere immediately changes. The Argentines make it fairly clear that they resent the idea that the United States’ plan for standardization of arms might set a quota for Argentina. Their feeling is that Argentina must be free to arm to whatever extent it sees fit and that it should be the arsenal of at least the southern part of South America. They may be expected to place great emphasis on industrialization in Argentina and the manufacture of armaments in this country. They feel that in the case of war, Argentina should be able to take care of most of its own needs and of the requirements of its neighbors. It would not require an astute observer to reach the conclusion that Argentina is as determined as ever to have a dominant position in its part of the hemisphere.…
Communism
Several high officials have remarked to me recently in discussing the Bogotá conference62 and defense against Communism that the United States needs Argentina much more than Argentina needs the United States. They admit that Argentina needs technical and material assistance from the United States for its industrialization but argue that the fight, when it comes, will be between the United States and Russia and that Argentina will be helping the United States. The logic of all this is not too clear; but it boils down to the fact that while the Argentines who are so preoccupied with the Communist problem are no doubt sincere in their opposition to Communism, they want at the same time to derive every possible advantage [Page 209] from their promise to help us out. In future discussions and especially in the Bogotá conference, they will no doubt harp on the need for industrializing the Argentine and enabling it to manufacture armaments and munitions so that it will not be dependent on the United States in case of an outbreak of war.
As reported to the Department, the Foreign Minister and the President have suggested that we enter into an anti-Communist pact which would not only include an exchange of information but the taking of precautionary measures and defense against Communism. One of these precautionary measures would be the military strengthening of the Argentine. They also suggest a series of bilateral agreements among American countries to combat Communism.
Conclusion
Whatever the defects of the Perón administration may be—and they are plentiful—we should realize that both in the Government and outside, the prevailing tendency is one of strong nationalism and an almost exalted feeling of … importance. The problem of our relations with the Argentine should not be insoluble; but in dealing with the present administration or any other, we should take into account … the general prevailing spirit of nationalism, and the ever-existing Argentine determination to be kingpin in the southern part of the Western Hemisphere.
Respectfully yours,